economics of carbon

There is consensus that climate change is the single largest threat to global economy. Effective methods to tackle the growing effects of global warming are yet to be devised. However, there has been several measures to quantify carbon emission. Both the Kyoto Protocol and the EU Emissions Trading Scheme (EU-ETS) are based on the pollution trading model. By giving greenhouse gases a price, trading is also supposed to encourage businesses to invent new, lower-emitting technologies. One problem is that carbon trading encourages the industries most addicted to coal, oil and gas to delay shifting away from fossil fuels.

Critiques of the Carbon Economy
One of the oft-heard complaint is that they encourage ‘passing the buck’, rather than alleviating the situation. They have also been repeatedly critiqued for merely salving consciences; for privatizing the public or societal cost of carbon pollution; for, in the case of some projects, dispossessing ordinary people of their land and water. Global warming requires reorganization of society and technology so that fossil fuels can be left in the ground. It is a false economy to try to set up a market system that requires enormously complicated, centralized carbon accounting merely in order to save corporations a bit of money in attaining unambitious, near-term targets. Time and brainpower would be better spent in laying enduring foundations for an entirely new regime of energy use.

Carbon Trade Schemers
Carbon trading schemes are based on the ‘polluter pays’ principle. However, high-polluting industries and nations are being granted nearly as many free pollution rights - which they can then trade lucratively - as they need to cover their current emissions. Under the EU ETS, some of the worst greenhouse offenders have garnered hundreds of millions of pounds in windfall profits for pursuing business as usual, while ordinary citizens suffer higher electricity prices and developers of renewable energy go begging.

The Kyoto Protocol and the EU ETS are weakened further by loopholes allowing big polluters to buy cheap 'offset' credits from abroad to 'compensate' for any emissions not covered by free pollution permits. A British cement firm or oil company lacking enough permits to cover its emissions can make up the shortfall simply by buying credits from, say, a 'carbon-saving' wind farm in India, a scheme to destroy globe-warming HFC refrigerants in Korea, an energy efficiency programme in South Africa, or a project to burn landfill gas to generate electricity in Brazil.

The domestic inaction that this arrangement enables might be justified if it were part of a larger revolution in the way energy is used and produced worldwide. But it isn't. The foreign carbon projects being used to license industry's continued emissions at home are supplementing fossil fuel use; they are not replacing it. The institutions most active in setting up 'offset' projects - ranging from the World Bank to Tokyo Power - are precisely those most committed to burning up more and more coal, oil and gas. The logical endpoint of this approach is a landscape covered in the carcasses of wind farms, solar stations and biofuel plantations - all baking in a greenhouse atmosphere that can no longer support human civilization.

Many ordinary people in the South have more immediate concerns about carbon trading. The Durban Group for Climate Justice documented how carbon credits are being generated almost exclusively by local environmental offenders, while communities preserving local forests or defending their lands against oil exploitation or coal-fired power plants are being ignored. It is big polluters, after all, who tend to be in the best position to hire carbon consultants, liaise with officials and pay money to get projects registered with the UN carbon market.

In Brazil, locals are up in arms against a land-grabbing plantation and pig iron firm that tried to peddle credits on the ground that without the carbon money it would have to replace its charcoal fuel with mineral coal. In India, the notoriously polluting, water-guzzling sponge iron industry of Chhattisgarh was among the first to try to sell carbon credits for being 'green'. Worldwide, many communities interviewed had no idea that their local corporate bad citizens were getting extra cash from the carbon market - but were not happy to hear it.

The carbon market helps keep an oppressive fossil-centered industrial model going at a time when society should already be abandoning it. There are better ways of tackling climate change than by privatizing the earth's carbon-cycling capacity. Public investment; shifting subsidies away from fossil fuels toward renewables; conventional regulation; support for the work of communities already following or pioneering low-carbon ways of life - all are more direct ways of bringing about structural change.

The US wrote carbon trading into the Kyoto Protocol before abandoning the treaty to its fate. With the advent of Copenhagen, there is an increased need to reform the basis on which any future carbon schemes are based upon. The sclerotic market apparatus that came about after Kyoto does not serve the best interests of either South or North. The Northern bloc cannot continue polluting and expect the Southern bloc to pay – the impacts are disproportionate. A lot of time has been wasted that is not available to waste discussing a model that is essentially a failure. It had more than a decade to work and it didn’t, it is time for a change.